Is there Truth Behind the Macromedia Takeover Rumors?

Once again, the media is speculating that Microsoft will soon acquire Macromedia, maker of Flash, the popular animation tool and development platform.

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Every so often, the rumor resurfaces. This go-round, technology news service ComputerWire is the one claiming that Microsoft will soon purchase Macromedia, the San Francisco software company whose Flash graphics tool is slowly becoming an important means of developing business applications. "Microsoft Corp is believed to have trained its acquisition crosshairs on Macromedia Inc," ComputerWire says, "lining up a deal that would throw enterprise Java into a spin." Is the story true? And if it is trueif Microsoft does take control of Flashwill this really pose a threat to Java 2 Enterprise Edition (J2EE), the application development platform that's in direct competition with Microsoft's .NET architecture?

At this point, there doesn't seem to be any evidence that this age-old rumor will finally come to fruition. "The rumors have been going around for years," notes Bruce Epstein, who has written and edited several books on Macromedia and its software. He keeps in close contact with Macromedia employees and other people associated with the company. "I don't think there is any hard evidence that Microsoft will acquire Macromedia anytime soon," he says.

Still, Epstein admits that if executives and other employees he knows within Macromedia were aware of an imminent takeover, they wouldn't necessarily let him in on the secret. But he's confident that Macromedia's stock price$11.70 as of midday Tuesdayis too low for the rumor to be true. "If Macromedia's stock were closer to $15 than $10, I'd say that this was a sign that somebody knows something."

A Microsoft spokesperson, asked to comment on the rumor, was uncooperative: "There are many and various rumors about Microsoft's investment and acquisition plans, and Microsoft has a strict policy of not commenting on any of them." Calls to Macromedia went unanswered.

But what if an acquisition were to happen? The ComputerWire story speculates that Microsoft would use Flash to "thwart J2EE uptake," tweaking the Macromedia toolwhich developers can now use with myriad different operating systems and development platforms, including Javaso that it works only with Microsoft products. "A Microsoft acquisition of Macromedia would inevitably see Flash, and Macromedia's other cross-platform tools, tailored purely for Windows and .NET," the story says.

Such speculation seems wide of the mark. The greater concern, according to many analystsincluding Epstein and Tom Dwyer, vice president and managing director of the Enterprise and Internet Infrastructure practice at the research firm Aberdeen Groupis that Microsoft would simply dispense with Flash altogether. "If Microsoft were to pick up Flash, I think a lot of people would wonder whether it would maintain the level of investment in that part of the Macromedia product line," says Dwyer.

Flash began life as a vector-based graphics tool that let you add graphics and animations to your Web site, serving them up to any browser equipped the Flash player. The player, a free download compatible with many Web browsers across many different operating systems, soon became nearly ubiquitous. According to a study from NPD Online Research, almost 98 percent of all Internet users can now view Flash content.

But since its 2001 merger with Allaire, maker of the popular ColdFusion and JRun Web servers, Macromedia has worked to turn Flash into a serious development tool. The company realized that since Flash authoring is a relatively simple process, and the Flash player is so widely used, the technology would be an excellent means of building front ends for Web applications. With the latest version of Flash, known as Flash MX, you now can build a Flash front end and easily tie it to Java, .NET, ColdFusion, and other back-end application servers.

"After acquiring all that back-end server support from Allaire, Macromedia has done a lot of work extending the reach of Flash, so you can use it to develop a rich-client application that has extensive integration with the back end," says Aberdeen's Dwyer. The boon to developers is twofold: They can build complex, attractive front ends much more easily than they could with Java or .NET, and they can be sure that those front ends will run on most browsers.

Microsoft isn't likely to tailor Flash to work with Windows and .NET exclusively when it can just build a similarly lightweight, easy-to-use authoring tool from scratch and tack that onto .NET. In fact, the company may be doing this very thing. "There is some evidence to suggest Microsoft is developing [its] own Flash competitor, which could be taken as a sign that [it doesn't] have interest in Macromedia," says Epstein. Flash has become an important development tool precisely because it runs on so many platforms and ties into so many different back-ends. Without those properties, it's just another piece of software.

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Microsoft would be much more likely to simply do away with Flash. When used as an application front-end, Flash would become a threat to Microsoft's dominance in much the same manner that the Netscape browser was in the mid-ninetiesas a way of running applications independent of the Windows operating system. "What's the biggest threat to Windows as a dominant platform? Flash," declares Epstein. "It's a ubiquitous client that runs the same on all platforms. It's very lightweight, and it fits the needs for the type of modern apps people are usingthings like Amazon and eBay and Google."

Just as with Netscape, Microsoft may seek to quash the influence of Flash. "If your Internet users have Flash, they don't need Windows," says Epstein. "People in the Macromedia community don't want Microsoft to acquire Flash because they see Microsoft eventually killing the product."

Chances are, this won't happenat least not anytime soon. Microsoft isn't in a position to unceremoniously purchase competitors and kill off their products, a belief Epstein echoes. "My guess is that [Microsoft isn't] considering [a Macromedia acquisition] at least until the antitrust case is settled."

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